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Can you understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. The law is upheld by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Emergence of Offshore Courts

Nowadays, international firms, and the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The government might be compelled to rescind the measure. It is discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as companies take cues from each other, and investment funds fund legal actions for a share of a portion of the takings. The result? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices made by legislatures is that this stipulation has been written – without public consent, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer determined that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on national carbon targets. The new government subsequently revoked the licence the previous administration had granted. Today, this success is under threat by an offshore tribunal reporting to only the corporations petitioning it.

In August, a corporate entity whose final controllers are based in the tax haven initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has little idea how much this could amount to. Who is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The state passes a law, the high court supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it seems likely that he will utilise the tribunal to challenge the penalties the UK levied against him subsequent to the Russian aggression. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this issue labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “once firms start to realise the power they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That prediction is now a reality. In the current period, energy and mining firms have lodged a historic level of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP